March 30, 2015

Audit: Medicaid Program Rife With Problems

At this point, it goes without saying that Missouri’s Medicaid program has issues. From technical snafus to indisputable quality and access problems, the state’s Medicaid program has a long track record of failure that should dissuade responsible lawmakers from compounding the problem with an expansion of the program.

This fact is made all the more obvious by this story, reported last week.

Missouri’s Medicaid program could have recovered as much as $27 million from more than 30,000 estates of deceased patients but did not file claims in time, according to a statewide audit of federal programs released Tuesday.

Federal and Missouri laws allow the state to recover Medicaid funds spent on a participant as a state debt but a claim against the person’s estate in probate court must be filed within a year of their death. Of 9,321 cases closed in fiscal year 2014 by the MO HealthNet Division, an average of $15,000 was recovered from 6 percent of those, according to the audit.

The $27 million estimate is based on a similar estimated recovery rate for the 30,000 cases that were past the deadline to file. . . .

According to the audit, “MHD personnel indicated there are not sufficient staff in the Probate and Estate Unit to process all probate estate cases timely and cases are not prioritized in an effort to maximize recovery.” The department says it will work to fix the problem but that response is a recurring theme in audits of Missouri’s Medicaid program.

Indeed, there were more problems uncovered by the audit that a short news story frankly can’t get to, including documentation, oversight, payment, and coding problems. In fact, the sentence construction of “As noted in X previous audits” dots the report’s summary. In other words, many of these are enduring, not passing, problems.

If you believe in good government, the department’s semiannual refrain of “We’ll do better next time” should be intolerable. The solution isn’t growing the program; it’s fixing it. There are ways to make the Medicaid program in Missouri better. Expanding a broken status quo is not one of those ways.

March 20, 2015

Mark Your Calendars, Kansas City and St. Louis: Michael Cannon is Coming to Town

Michael Cannon is the director of health policy studies at the Cato Institute and is one of the most prominent figures in the free market movement today. Cannon’s national influence extends to a wide swath of health care issues, but lately it’s his work focusing on the health insurance subsidies of Obamacare that has been most prominent. With Case Western Reserve law professor Jonathan Adler, in 2013 Cannon co-wrote “Taxation Without Representation: The Illegal IRS Rule to Expand Tax Credits under the PPACA.”

If that topic sounds strangely familiar to you, fear not; it is indeed the topic at the center of the King v. Burwell case, which is currently before the Supreme Court. Cannon has been instrumental in not only providing the research that undergirds the plaintiffs’ case, but he has also been instrumental in delivering clear, concise and compelling explanations of what the government did with these subsidies (and why it matters) to audiences across the country. Michael’s Washington Journal segment below, recorded for C-Span earlier this month, provides a good preview of what he’ll be talking about next week.

I hope you’ll be able to join us, either in Kansas City on March 25 at 5:30 pm at the Kansas City Club, or in St. Louis on March 26 at 5:30 pm at Saint Louis University. Both promise to be excellent events.

March 18, 2015

In Support of An Outside Audit of Missouri’s Medicaid Program

HealthcareLast month we wrote about a state audit of the St. Joseph School District that turned up tens of millions of dollars in questionable stipends, given out over the course of a decade. Good government requires constant vigilance over how our officials spend taxpayer money; events in St. Joe underline that fact.

But the state’s school districts aren’t the only state programs that deserve a closer look from Missourians. So, too, does the state’s Medicaid program, and neighboring state Illinois serves as a good example. From the Wall Street Journal late last year:

The federal government requires states to do an annual audit of the Medicaid rolls to ensure that participants are eligible, but in most states few people are removed. Ms. Bellock wanted to use an outside, private firm, Virginia-based Maximus, to audit [Illinois's] 1.3 million Medicaid case files—which represents about 2.7 million individuals. The company has more extensive databases than the state and would likely identify more ineligible Medicaid beneficiaries.

Maximus recommended removing 249,912 cases by the end of February 2014, according to the state. By law, state employees had to review the recommendations and decide if cancellation is appropriate. The state removed 148,283 cases—about 234,000 individuals, as many cases represent families—from the Medicaid rolls.

Many of the removals suggested in Illinois were probably the product of expected churns in incomes; as people earn a little more money, they may no longer qualify for the Medicaid program. There’s nothing necessarily nefarious about that.

But whether people receiving benefits improperly are doing so because their incomes have recently changed or because they’re unambiguously defrauding the system, that doesn’t change the fact that the money has been misspent — and misspent needlessly. No one knows for sure if the same kind of waste that happened in Illinois is going on in Missouri, but that’s sort of the point; like in the St. Joseph School District and Illinois, the only way we can prevent future problems is with vigilance today.

Wasted money hurts the people Missouri is trying to help by siphoning off limited state resources, and that’s why Illinois’s third party eligibility verification framework, which appears to have effectively identified thousands of ineligible beneficiaries in the Land of Lincoln, is one Missouri may want to consider. Our state’s auditors deserve our immense appreciation for the work they do currently, but they don’t always have the resources or data to do some of the analyses some of these private vendors can do. As a supplement to our auditors’ work — and mark your calendar, because I don’t say this often — the state should think about following Illinois’s lead.

March 16, 2015

Florida Story Shows Risk of Conflating Medicaid Waivers With “Block Grants”

HealthcareEarlier this week I was asked by the Kansas City Star for my thoughts on a Medicaid expansion proposal being marketed as a “block grant” that’s currently circulating in the Missouri Senate. The problem? It’s not a block grant but rather a waiver, and I noted that as structured, the proposal could “guarantee Obamacare’s expansion but would not guarantee key reforms.”

The concern with waivers (Medicaid and otherwise) is their time limitations. When a waiver’s term expires, it’s up to the Federal government to determine whether that waiver will continue — and if the waiver continues, under what conditions.

Enter Florida.

The CMS will not renew a Medicaid waiver in Florida expiring at the end of June that provides more than $1 billion a year to help the state’s hospitals with uncompensated-care costs for low-income and uninsured patients. That may put additional pressure on Florida Republican leaders to consider expanding Medicaid to low-income adults under the Affordable Care Act.

Since 2005, Florida has had a Section 1115 Medicaid waiver establishing a low-income funding pool to aid the state’s hospitals. The state has received between $1 billion and $2 billion annually to support safety net providers.

To have genuine block grant Medicaid reform at the state level, the Medicaid laws would first have to change at the Federal level. Short of that, states and their Medicaid programs will always be subject to having the policy rug pulled out from under them. Florida is seeing this firsthand with a waiver that existed long before Obamacare passed but whose continued existence may hinge on implementation of Obamacare’s Medicaid expansion.

It’s good to hear politicians at least give lip service to a substantive change to Medicaid, but if little more than lip service is all that can be guaranteed in the Medicaid reform discussion, then Missouri taxpayer: beware. A waiver may look like a carrot, but it can easily be used like a stick. Just ask Florida.

Until flexibility in state reform is enshrined in Federal law with unambiguous block granting language, enduring and dynamic Medicaid reforms will be little more than a policy mirage. Unfortunately, a request for a waiver under Obamacare simply doesn’t cut it if long-term, state-based and patient-centered Medicaid reform is going to ever be a reality in the Show-Me State.

March 4, 2015

Proposed Senate Bill Would End Obamacare Medicaid Expansion Nationwide

Last month, a trio of U.S. senators released their version of an Obamacare replacement bill, which they called the Patient Choice, Affordability, Responsibility, and Empowerment Act (Patient CARE Act). The legislation would initiate a host of changes to how health care is delivered in the United States . . . and that includes a wholesale rollback of Obamacare’s Medicaid expansion.

03/492 According to the Center for Health and Economy,

The federal funding for the Medicaid expansion provided by the ACA is no longer available under the Patient CARE Act. Additionally, the current Medicaid funding mechanism will be replaced with capped, per-beneficiary allotments that are indexed to inflation. States will receive pass-through grants for certain high-risk populations and defined budgets for long-term and elderly care.

Translation? In many respects, Medicaid would return to its intended focus of assisting those in poverty—that is, those at and below the federal poverty level—rather than those above the poverty line. That’s extraordinarily important. Obamacare’s Medicaid program basically makes able-bodied, childless adults not in poverty a federally preferred class of beneficiaries, with the federal government paying a greater share of the cost for many adults above the poverty line (90/10 federal to state) than it does for all sorts of beneficiaries below it (roughly 60/40).

Are adults between 100 percent and 133 percent of the federal poverty level rich? No. Are they in poverty? Also no, by definition.

Keep in mind, too, that the Patient CARE Act is only one of many proposed overhauls of the country’s health care system. All of its provisions, as well as the provisions of competing reform legislation, need to be debated on their merits in the weeks and months ahead. (We have our own ideas for key reforms of our health care system, of course.)

Make no mistake: Taxpayers have every right to be skeptical of the federal commitment to fully fund its portion of the Medicaid expansion indefinitely as the government swims in trillions of dollars of fresh debt. As the unsustainable fiscal realities of the Medicaid program and this Obamacare alternative both demonstrate, taxpayer skepticism of the expansion’s future is fully warranted.

March 2, 2015

King v. Burwell: A Quick Preview

Last month, constitutional law expert Josh Hawley visited with Show-Me Institute supporters to discuss a wide array of health care policy issues. While he was with us, he offered some great insights into this Wednesday’s King v. Burwell oral arguments. If you can set aside about 45 minutes, watch the video of the whole event; you’ll be glad you did.

If you’re short on time, however, the case deals with what happens when a state declines to set up an insurance exchange under Obamacare, forcing the federal government to do so instead. Here’s the big question in King: Does the Affordable Care Act (ACA) block federal subsidies from going to insurance plans purchased in government exchanges that were not, as the law says, “established by the State”? If the answer is yes, it could simultaneously take subsidies away from millions of insurance plans and protect millions of taxpayers from the law’s mandates. It’d be a body blow to the law.

Why would Congress condition subsidies on states building their own exchanges? The answer is reasonably straightforward: Congress didn’t want the burden of creating exchanges to be on the federal government—that is,—and thought offering the subsidy as a carrot would get states to do the heavy lifting. Congress never thought the federal government would be running the exchanges for basically two-thirds of the country, as it’s doing today.’s rollout disaster was part and parcel of this miscalculation by Congress.

Supporters of Obamacare now contend the “established by the State” language was a drafting error, but there is lots of evidence that runs against that claim. The state exchange “carrot” strategy had appeared in prior, contemporaneous bills that were combined to form the ACA—suggesting that at least some legislators were well aware of the system they were creating. In fact, in the years that followed, Obamacare architect Jonathan Gruber famously repeated what the consequences of states not building their own exchanges would be:

With most states declining to create their own exchanges, the Internal Revenue Service then wrote rules that would extend the federal subsidies not only to exchanges “established by the State,” but also to federal exchanges. The problem is that since the federal subsidies are the basis for penalties that, thanks to the IRS, would suddenly apply to tens of millions of Americans in states that didn’t create exchanges, those subsidies could be an illegal tax. Thus, we have the King litigation.

After Wednesday’s oral arguments, we’ll likely see a decision handed down on the case sometime this summer. How will it turn out? We’ll keep you posted.

February 26, 2015

Constitutional Law Expert Joshua Hawley Weighs in on Obamacare at Policy Forum

Joshua Hawley, a professor of law at the University of Missouri, was gracious enough to join the Show-Me Institute in Columbia last month to talk about a wide array of health care and Obamacare issues, including King v. Burwell, a case before the Supreme Court the week of March 2.

Much could be said about Hawley. A graduate of Stanford University and Yale Law, Hawley went on to clerk for Chief Justice John Roberts. He was one of the attorneys for Hobby Lobby in last year’s Burwell v. Hobby Lobby case, and he has been a highly sought-after speaker on a wide variety of legal and historical matters for a number of years. His book, Theodore Roosevelt: Preacher of Righteousness (2008), is available on Amazon. Hawley also happens to be a graduate of my alma mater, Rockhurst High School, in Kansas City.

His talk is definitely worth your time. A short version is embedded below, and the complete talk can be found here.

February 20, 2015

Shock and Audit: St. Joseph School District Out Tens of Millions Because of Staff “Stipends”

Missouri has seen its share of boondoggles. To name a few in recent years, Moberly was taken in on a $39 million sucralose scam that downgraded the city’s credit rating, left bondholders hanging, and resulted in jail time for one of the masterminds. In Kansas City, officials had to settle with a developer for millions over the failed Citadel redevelopment project, which saw criminal prosecutions of its own.

Now enters the St. Joseph School District. As reported by the St. Joseph News-Press:

“We went back about eight years and found there was over $25 million worth of stipends either not approved, unauthorized or improper. That $25 million worth of stipends is what we found to be problematic,” [State Auditor Tom Schweich] told the crowd inside the Oak Grove Elementary School commons area.

Since there was not full documentation going back further than 2001, Mr. Schweich added, that number could be in excess of $40 million paid out in stipends over that period.

“That is a startling amount of money,” he said, followed by a collective groan from the audience.

“Startling” is an understatement. The questionable stipends account for, on average, over $3 million each of the last eight years that could have gone toward substantive and proper investments in the education of St. Joseph’s children. Instead, according to the News-Press, it appears the money went to a wide array of cronyistic efforts,

including $45 for a Sam’s Club membership for [Superintendent Dr. Fred] Czerwonka, $1,500 for a painting for [Chief Operating Officer Rick] Hartigan’s office and $7,650 in free Internet service for 16 individuals, including an individual the district claimed they did not know.

In the auditor’s words, the stipends operated much like a “slush fund.” Throw in $3.4 million in overpayments from the state to the district because of inaccurate reporting and a swath of closed district meetings that should have been open to the public, and you have the makings of a full-blown scandal in northwest Missouri. It remains to be seen whether criminal action will be taken in the matter, but that seems to be very much on the table at this point.

Frequent readers of this blog know about our positions on transparency (for) and cronyism (against), so I won’t belabor those policy prescriptions in light of the district’s failures. The sheer magnitude of the district’s blackbox behavior is a better argument for vigilance and reform of state and local government than my words alone could offer.

It also goes without saying (though I’ll say it anyway) that “per pupil spending” remains a meaningless statistic, a fact emphasized here. How much you spend “on” a student doesn’t matter if the line items are $1,500 on administrators’ art, rather than $1,500 on the art department.

And yes, there will be many important story lines that will be worth talking about as the district’s actions are fully vetted, but one story line that has to remain front and center is how shameful it is that it took more than a decade for these problems to fully come to light—and the risk that St. Joseph’s scandal is just the canary in the coal mine statewide. That this school district was insulated so long from critical oversight makes me wonder whether similar behaviors might be taking place in one of the other 519 districts (!) in the state . . . and we simply don’t know it yet.

More to the point: If Missouri’s school districts are going to tell the state they have funding problems, then it’s fair for the state and the taxpayers to take a fresh look at how each district spends, or misspends, the state’s tax dollars. That is especially true in light of St. Joseph’s present troubles.

Education funding should be for the children, not for the districts, and it’s time district books were cracked open and thoroughly reviewed. For the state to deliver a quality education for our kids, it needs to hold every district accountable not only to stop problems like this from happening again, but also to ensure that they’re still not happening someplace else.

February 9, 2015

Tennessee, Wyoming Reject Obamacare’s Medicaid Expansion (Again)

Medicaid is back in the news as pushes to implement Obamacare’s expansion in Tennessee and Wyoming came to a head last week—with both states rejecting the expansion.

First, Tennessee:

Tennessee was widely seen as the next Republican state that could expand Medicaid under Obamacare, with Haslam negotiating with federal officials for months on an approach that included conservative policy elements. But Insure Tennessee always faced significant obstacles in getting legislative approval, and it was killed even though hospitals had agreed to cover the state’s share of the costs.

The 7-4 vote against the plan by the state Senate Health and Welfare Committee came after impassioned testimony on both sides of the debate. The plan has little chance of being revived during the regular legislative session.

The “hospitals will cover the cost” proposal is becoming a common sleight of hand in the realm of conservative Obamacare apologetics. Those costs would be passed on to customers, either directly through their bills or indirectly through their taxes. It’s not free money.

And then there’s Wyoming:

Several senators said Friday they don’t trust federal promises to keep paying. Some said they don’t want to contribute to the national debt by accepting more federal dollars in any case.

“Make no doubt about it, this saddles more debt upon your children and your grandchildren,” said Sen. Larry Hicks, R-Baggs, who voted against the bill.

[Sen. Michael] Von Flatern said that Friday’s vote could make it harder to get expansion in the future because the bill to the state will be higher.

Mr. Hicks is exactly right that the expansion is being funded out of debt, and Mr. Von Flatern is similarly right that the direct costs of the expansion are on the way and will make later expansion fights tougher for Obamacare proponents. Right now supporters are relying on the “no money down” provisions of Medicaid expansion; once that’s gone, then the question of how a state actually pays for the program comes into sharper focus.

Missouri should continue rejecting bad policy like the expansion. It certainly isn’t alone in doing so.

December 11, 2014

Obamacare’s Medicaid Expansion as “Job Creator”? Not So Fast

One of the Left’s favorite talking points for why states should expand Medicaid is that doing so will mean more jobs at Missouri’s hospitals. That argument is attractive, at least superficially; if the government spends more money on health care, the assumption could be that more people will be hired by hospitals. In other words, it’s “the stimulus” debate all over again: If you spend it, there will be jobs.

But is it true that Medicaid expansion actually leads to hospital job growth? So far, it sure doesn’t look like it (emphasis added).

U.S. healthcare employment began to accelerate after the first three months of the year and the uptick caught the attention of economists with the Altarum Institute, who conducted the analysis to determine whether hiring grew faster in Medicaid expansion states. It did not, they found. In fact, growth was faster in states that did not expand Medicaid, said Ani Turner, deputy director of Altarum’s Center for Sustainable Health Spending.

Proponents of expansion have touted the economic benefits of increased Medicaid enrollment, as they make their case to reluctant state governors and lawmakers. Indeed, hospitals in states that expanded eligibility are seeing less bad debt and fewer uninsured patients. But it might become harder to argue that Medicaid expansion is a jobs engine if the numbers don’t bear it out.

Healthcare averaged 14,271 new jobs a month from April to October in states that did not expand Medicaid, up 117% from the preceding 12 months. The healthcare employment increase in Medicaid expansion states over 2013, meanwhile, was 92%.

You can find one of Altarum’s briefings on the subject here. Missouri is fortunate that by rejecting the expansion it can carefully watch the experiences of other states who did expand their Medicaid programs—decisions oftentimes based on the specious promises of special interests and ambitious politicians. As the numbers come in and oft-cited expansion states like Arkansas consider reversing course, the Show-Me State’s hesitance to jump into the Medicaid expansion pool looks all the more appropriate.

December 9, 2014

Gruber on Arkansas Private Option: “Mathematically Impossible” to Be Budget Neutral

November was a bad month for Obamacare. Over just a few weeks, voters not only handed a series of punishing defeats to Obamacare at the ballot box, but the Supreme Court unexpectedly granted a hearing to the lawsuit King v. Burwell, which poses a serious threat to the future of the law.

Those setbacks haven’t quite kept Missouri’s Obamacare supporters from pushing ahead with their Medicaid expansion plans. In fact, some Missouri politicians have tried to use Arkansas’ Medicaid “transformation” as a reason to expand Medicaid in Missouri. But recent video revelations confirm that the state’s decision not to follow Arkansas’ lead was the right call.

In April 2013, Arkansas passed a Medicaid expansion more commonly known as the “Private Option.” The expansion uses federal Medicaid dollars to pay for Obamacare exchange health care plans for newly eligible Medicaid beneficiaries. Supporters claimed that the plan would save Arkansas money, but as it turns out, that was likely never going to be the case. Indeed, Obamacare architect Jonathan Gruber, who hailed his law’s lack of transparency, said as much . . . in October 2013, in a video only now coming to light:

The video is only the latest setback for Arkansas Obamacare supporters. After losing his State Senate primary, Arkansas’ chief Obamacare Medicaid architect won’t be returning next year to the legislature, largely due to his support of the expansion. And after last month’s general election, Arkansas might actually roll back its Obamacare expansion.

Missourians are being sold a bill of goods on Obamacare’s Medicaid expansion, just like Arkansas was before them. We deserve better than tired, old political strategies, and rather than look at Arkansas as an example to be followed, Missouri should look at it as a cautionary tale to be avoided.

December 8, 2014

Iowa, Nebraska, and Arkansas Legislators Gear Up for Income Tax Cuts

In 2014 the Missouri Legislature passed a modest income tax reduction which, given its size, by no means solved the state’s tax competitiveness problems. That fact is reaffirmed by the news we’re now hearing from some of Missouri’s neighbors. For instance, in Iowa—where state lawmakers cut taxes as recently as 2013—the income tax reform movement is getting bipartisan support.

State Rep. Tom Sands, R-Wapello, chairman of the tax-writing House Ways and Means Committee, said his preference would be to examine corporate and individual income taxes while exploring ways to simplify the tax system. Senate Majority Leader Michael Gronstal, D-Council Bluffs, said any tax cuts should be focused on helping middle-class Iowans.

“We will most definitely be looking at income tax reform, making the tax code flatter and simpler,” Sands said.

Sands added he hopes lawmakers will offer “substantial and meaningful tax cuts,” although he explained it’s too early to provide a specific dollar estimate because of uncertainties over state revenue.

Iowa is not the only border state looking to make income tax changes. In neighboring Nebraska, legislators (with the help of the Platte Institute) are exploring a round of tax cuts of their own that would also chop the state’s tax on incomes. On Missouri’s southern border, Arkansas is looking to cut its income taxes too, in part by getting the state’s tax exemption culture under control.

“They’re important to you; therefore, they’re important to me,” [Governor-elect Asa] Hutchinson told the [farming] group. “But we are now reaching a point in Arkansas that we need to look beyond more and more exemptions to our tax structure, and we need to look at an across-the-board reduction of our state income tax.”

Missouri lawmakers deserved applause for finally getting a tax cut across the finish line in 2014, but as we said at the time, that small cut alone is not enough to get the state on a firm, competitive footing for the years ahead—precisely because other states in the region weren’t going to stand still on tax relief. News out of Iowa, Nebraska, and Arkansas confirm this.

And make no mistake: The support for tax cuts has never been greater in the Missouri Legislature than it will be in 2015. Legislative leaders should not sit on their hands and let the opportunity pass them by. Our neighbors certainly aren’t.

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